BC Business
Living debt-free means being realistic with your budget, as the Greeks are teaching us.
Lessons from the Greek debt crisis: set priorities, watch your money and get yourself a good pair of shoes. Greece invented the Olympics. So maybe we shouldn’t be surprised about the whole debt crisis. These are the people who turned massive, irrelevant expenditure into a triumph of the human spirit. ?
Greece invented the Olympics. So maybe we shouldn’t be surprised about the whole debt crisis. These are the people who turned massive, irrelevant expenditure into a triumph of the human spirit.
As the Greek debt crisis roiled the markets, pummelled the Euro and sent protesters to the streets, the rest of the world looked for lessons. Actually, it didn’t look very hard. This wasn’t exactly an Agatha Christie mystery. More like the Mike Tyson Story, in which a sporting legend proves to have the financial sense of an inebriated Marine.
I do enjoy Greek food. But not on credit. A spanakopita bought is a spanakopita earned, I always say. Same goes for pizza, sushi and automobiles. Debt has never been to my taste. My approach to financial management has always been pretty hard-core. I’ve never taken out a loan. I’ve never had a mortgage. I didn’t get a Visa card until I was in my 40s. Now that I have one, I pay the full balance every month.
Apparently, this makes me something of a circus freak. Personal debt levels have risen steadily in Canada since the mid-’80s, while personal savings rates have dropped like network TV ratings. A new survey from the CGA Association of Canada says the average Canadian has debts of almost $41,740 – 2½ times the level of 1989. As for British Columbians, our savings rate is six per cent lower than the (lousy) national average, while B.C. bankruptcies climbed almost 43 per cent in 2009, the second-highest rise in the country.
A lot of personal debt involves student loans, which is hard to argue with. As for the rest of it, well, I suppose your nightly prayers for that new 41-foot executive-class RV with flat-screen TV and colour- co-ordinated patio awning is a private matter between you and your God. If borrowing is the answer to those prayers, so be it. I can only tell you that a budget free from debt charges is a wonderful thing.
I’ve never made a lot of money – the only time I’m ever looking at six figures is on reruns of Friends – but I’m capable of doing things not usually associated with my income level. I travel a lot. I wear shoes that belong in a much higher tax bracket. I set priorities and watch my money.
It’s a good strategy. But I am not planning any “Be Like Steve” tours of world capitals, admonishing chastened presidents and premiers to follow my fine example. I’m not a government. I don’t even buy people dinner. It may be standard campaign rhetoric that government budgets should balance like household budgets or that running a government is like running a business, but I don’t believe that. Governments have obligations and need budget flexibility.
Still, I think at least one legitimate parallel can be drawn from my example. My financial approach can be summed up as realistic. Realism is always useful; desire, on the other hand, tends to mess up budgets. In the European case, Greece wanted into the EU and the EU wanted Greece. So the Europeans turned a blind eye to economic danger signs, and the Greek government fudged the numbers in order to qualify. Everybody wanted it to happen, and so it did. Add that to the unrealistic spending sprees of the Greek government and the whole thing takes on the same air of delusion that precedes many large boat purchases.
Otto von Bismarck reportedly said, “Politics is the art of the possible.” Too many politicians take that quote to heart. Before you know it, everything seems possible. Hard choices don’t get made.
Then again, when politicians see riot police in the streets of Athens and tax revolt brewing in B.C., realism must seem like a luxury governments cannot afford. Easier to pull out the credit card.